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Relevant Cost for

Decision
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 MAKE OR BUY DECISION

INTEGRATED COMPANY
● Less dependent on its suppliers
● Ensuring a smoother flow of parts and
materials for production
● Able to control quality better  not
relying on quality control standards of
outside suppliers.
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USING EXTERNAL
SUPPIER
● Higher quality and lower costs due to
economies of scale
● Companies should be careful to retain
control over activities that are essential
to maintaining competitive advantage.

● Getting profit from parts and materials

that it is making
 MAKE OR BUY DECISION
Mountain Goat Cycles is now producing the heavy-duty gear shifters used in its most popular line of mountain
bikes. The company’s Accounting Department reports the following costs of producing 8,000 units of the
shifter internally each year:

Variable cost

Fixed cost
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An outside supplier has offered to sell 8,000 shifters a year to Mountain Goat Cycles at a price of only $19
each. Should the company stop producing the shifters internally and buy them from the outside supplier?
 MAKE OR BUY DECISION
All variable cost is
relevant
Relevant if it can be
avoided by outsourcing

Irrelevant because the

equipment is already
bought: depreciation = Company saves $
sunk cost 14 per bike by
Equipment could be sold outsourcing
 salvage value is
relevant, Outsource price
Equipment used for other $19 per bike
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products  opportunity
cost is relevant
Company loses $5
per bike if the
Common for all product company outsources
and therefore is irrelevant the bike
 DESCRIPTION EXAMPLE

You need to provide a neutral Our company has been selling its
THE SITUATION
description products in the US

It’s a desired change With a market share already above

THE COMPLICATION
of the current situation 40%
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It’s a result coming from the Should we enter the European

THE QUESTION
current situation market?
 Utilization of a Constrained Resource
• Because the company cannot fully satisfy demand, managers must decide which products or services
should be cut back.
• Fixed costs are usually unaffected by such choices, so the course of action that will maximize the
company’s total contribution margin should ordinarily be selected.

Contribution Margin per Unit of the Constrained Resource

Mountain Goat Cycles makes saddlebags for bicycles called panniers. These panniers come in two models—a touring
model and a mountain model. Cost and revenue data for the two models of panniers follow:
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 Utilization of a Constrained Resource
Some machines will be operating at less than 100% of capacity. At Mountain Goat Cycles, the
bottleneck (i.e., constraint) is a stitching machine. The stitching machine is available for 12,000
minutes per month. Data for the two models of panniers follow as shown below:

Assumption
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Total time
required for
both Products
 Utilization of a Constrained Resource
The stitching machine does not have enough capacity to satisfy the existing demand for mountain
panniers and touring panniers, therefore, some orders for the products will have to be turned down.
So, we should focus on the contribution margin per unit of the constrained resource.
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To maximize profits, the company should

contribution margin for each and the touring model
produce all of the touring panniers the
should be emphasized because the touring model
market will demand (7,000 units) and use
provides the larger contribution margin in relation to
the constrained resource. any remaining capacity to produce mountain
panniers.
 Utilization of a Constrained Resource
The computations to determine how many mountain panniers can be produced are as follows :

Therefore, profit would be maximized by producing 7,000 touring panniers and then using the remaining
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capacity to produce 2,500 mountain panniers.

 Utilization of a Constrained Resource
Managing Constraints
• Effectively managing an organization’s constraints is a key to increased profits.
• Managers can increase profits by producing the products with the highest contribution margin per
unit of the constrained resource and by increasing the capacity of the bottleneck operation.
• Managers should pay great attention to the bottleneck operation.
• The capacity of a bottleneck can be effectively increased in a number of ways, including:
- Working overtime on the bottleneck.
- Subcontracting some of the processing that would be done at the bottleneck.
- Investing in additional machines at the bottleneck.
- Focusing business process improvement efforts on the bottleneck.
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 “This is a quote, words full of wisdom that
someone important said and can make the
reader get inspired.”
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—SOMEONE FAMOUS
 01 Proyect & Strategy
You can describe the topic of the section
here

02 Consulting Proposal
You can describe the topic of the section
here

03 Change Management
You can describe the topic of the section
here
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04 Implement Changes
You can describe the topic of the section
here
 toolkit
01 PROJECT &
STRATEGY
You can enter a subtitle here if you need it
 PROJECT & STRATEGY
DEFINITION
You can give a brief description of the topic
you want to talk about here. For example, if
you want to talk about Mercury, you can say
that it’s the smallest planet in the entire Solar
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System
 Strategic planning project plan
STEP week 1 2 3 4 5 6 7 8 9 10 11 12

1-Kick off

2-Business insights

3-Mission and vision

Workshop # 1
4-Key Strategic Objectives

5-Strategic map

6-Balance scorecard
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7-Strategic objectives
Workshop # 2
8-First report
 Strategic planning project plan

Mission Vision
Venus is the second planet from the Jupiter is the biggest planet in the
Sun and it is very hot Solar System and a gas giant

Objectives Key Initiatives

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Despite being red, Mars is a cold Saturn is composed mostly of

place, not hot hydrogen and helium
 Strategy Map & Balanced Scorecard

PERSPECTIVES STRATEGIC OBJECTIVES

FINANCIAL F1- Insert your own text F2- Insert your own text

CUSTOMER C1- Insert your own text F2- Insert your own text

INTERNAL PROCESS
>I1- Insert your own text F2- Insert your own text
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LEARNING & GROWTH

L1- Insert your own text F2- Insert your own text
 Strategic Options: Risks

MARKET DEVELOPMENT DIVERSIFICATION

New

STRATEGY STRATEGY Use a different

MARKET

color for the

strategic option
you recommend
Current

MARKET PENETRATION PRODUCT DEVELOPMENT the company to

STRATEGY STRATEGY choose
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Current New
PRODUCTS
 Impact of the risks

5% 45%
Saturn Venus
Saturn is a gas giant and Venus is the second
has several rings planet from the Sun

20% 30%
Jupiter Mars
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It’s the biggest planet in Despite being red, it’s a

the Solar System Follow the link in the graph to modify its data and then cold place, not hot
paste the new one here. For more info, click here
 Corporate Strategies

Mars Venus Mercury

Despite being red, Mars is Venus has a beautiful name It’s the closest planet to the
actually a cold place. It’s full and is the second planet from Sun and the smallest in the
of iron oxide dust the Sun Solar System
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 Key Drivers Of The Profit

DESCRIPTION EXAMPLE

You need to provide a neutral Our company has been selling its
THE SITUATION
description products in the US

It’s a desired change With a market share already above

THE COMPLICATION
of the current situation 40%
toolkit

It’s a result coming from the Should we enter the European

THE QUESTION
current situation market?
 Decisions: Market, Product, Company

What will be the

profitability?

What is the potential demand What is the feasibility to

for our Product? enter this new Market?
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Sweet spot
 Strategic Perspectives

Venus Jupiter
Venus is the second planet from the Jupiter is the biggest planet in the
Sun and it is very hot Solar System and a gas giant

Mars Saturn
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Despite being red, Mars is a very Saturn is composed mostly of

cold place hydrogen and helium
 A PICTURE ALWAYS
REINFORCES THE
CONCEPT
Images reveal large amounts of data, so remember:
use an image instead of a long text. Your audience
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will appreciate it
 Awesome
words
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 Strong Business Plan

Political P
Replace the text with your own text
E Economical
Replace the text with your own text
Social S
Replace the text with your own text
T Technological
Replace the text with your own text
Legal L
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Replace the text with your own text

E Environmental
Replace the text with your own text
 Strong Business Case
TANGIBLE NET PRESENT
PROJECT COST $4M $14M $8M
BENEFITS VALUE

CASH FLOW (€ millions ) CHANGE IMPACT

Low Medium High

MANAGER Project manager name

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SPONSOR Sponsor Name

$24M $12M $26M $38M Follow the link in the graph to modify its data and then
paste the new one here. For more info, click here
 Financial Model
HISTORICAL RESULTS FORECAST PERIOD
ICM Model 2014 2015 2016 2017 2018 2019 2020 2020
BALANCE SHEET
ASSET
Cash xx xx xx xx xx xx xx xx
Accounts xx xx xx xx xx xx xx xx
Inventory xx xx xx xx xx xx xx xx
Current assets xx xx xx xx xx xx xx xx
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Property xx xx xx xx xx xx xx xx
Goodwill xx xx xx xx xx xx xx xx
Total xx xx xx xx xx xx xx xx
 Financial Model

60% 40%
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Jupiter Mars Mars

Jupiter is the biggest Despite being red, Follow the link in the graph to modify its data and then paste
planet Mars is cold place the new one here. For more info, click here
 Pricing Strategy

STANDARD ADVANCED
BASIC

20% 70% 10%

Venus is the second planet Jupiter is the biggest planet Saturn is a gas giant and has
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from the Sun of them all several rings

 02
CONSULTING
PROPOSAL
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You can enter a subtitle here if you need it

 Consulting Proposal

Services Fees Invoices

Mercury is the closest planet Venus is the second planet Mars is actually a very cold
to the Sun from the Sun place

Expenses Materials Terms

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Jupiter is the biggest planet It’s composed of hydrogen Neptune is the farthest planet
of them all and helium of them all
A PICTURE IS WORTH A THOUSAND WORDS
 Answers And Supporting Arguments

How can the company reduce Reduce costs by $5 millions through

its cost by 10%? operational improvements

Outsource non-core Evaluate cost and Select non-core One partner foreach
functions to save $3 Millions service level functions function

Simplify core function Design current Compare to

Adopt best practices
processes to save $1 Million processes Best benchmarks
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Review supplier cost to save Review current Evaluate cost of Negotiate supplier
$1 Million supplier costs suppliers contracts
 Prioritization Matrix: Impact & Effort

Impact Effort
An initiative with a high impact would mean The “effort” criteria is assessed based on the
one of the followings: followings:

-The initiative needs to happen in order to - Ease of implementation

achieve the desired future state - Time frame required
-The initiative will significantly reduce our - Resources required (Number of people,
cost or increase our revenue capital investment, etc.)
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 Prioritization Matrix

INITIATIVE IMPACT EFFORT

1 List all your potential initiatives Very high

2 List all your potential initiatives High

3 List all your potential initiatives Low

4 List all your potential initiatives Low

5 List all your potential initiatives High

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6 List all your potential initiatives Very high

 CHANGE
03
MANAGEMENT

toolkit
You can enter a subtitle here if you need it
Ansoff Growth Matrix
Do you know what helps you make your point clear?
Lists like this one:

- They’re simple
- You can organize your ideas clearly
- You’ll never forget to buy milk!

And the most important thing: the audience won’t

miss the point of your presentation

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 Business Case

Mercury is the closest planet Jupiter is the biggest planet

1 to the Sun
BUSINESS NAME
of them all 4

Venus is the second planet COMPANY LOGO Saturn is composed of

2 from the Sun HERE hydrogen and helium 5
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Mars is actually a very cold Neptune is the farthest planet

3 place
XX/XX/XX
from the Sun 6
 Competitor Comparison Table

ATTRIBUTES COMPETITOR A COMPETITOR B MY BUSINESS

PRICE $360 $320 $300

QUALITY Low Medium High

CUSTOMER AGE 20-40 18-45 18-50

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REPUTATION Bad Average Good

LOCATION Spain Italy EEUU

 Target

NAME Suzanne Wilson AGE 45 years OCCUPATION Lawyer-5 years experience

YOGA 80% Spanish English

FOOTING 60% Italian French

READ 70%

Venus has a beautiful name and is the second

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planet from the Sun. It’s terribly hot, and its

atmosphere is extremely poisonous. It’s the
second-brightest natural object in the night
sky. 100% 90% 70% 50%
 Implement, Track & Manage Progress
MANAGE PROGRESS

PROGRESS STATUS LINK

VENUS 65% www.yourlink.com

JUPITER 60% www.yourlink.com

MARS 75% www.yourlink.com

NEPTUN 40% www.yourlink.com

E
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EARTH 90% www.yourlink.com

CERES 70% www.yourlink.com

 Change Management Strategy & Plan

CHANGE SIZE COMPLEXITY SIZE:

● Extreme
1 Name of change Extreme 1 Team impacted ● High
● Medium
2 Name of change Extreme 1 Business unit ● Moderate
● Low
3 Name of change High 1 Division
COMPLEXITY:
4 Name of change Medium Half company ● Team
● Business
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5 Name of change High Extreme ● Division

● Company
6 Name of change Moderate Half company ● Extreme
toolkit

IMPLEMENTING
CHANGES 04
You can enter a subtitle here if you need it
 Sales And Strategy Plan

1 2 3

Implementation Internal analysis External analysis

5 4
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Sales plan Sales strategy

 500,000
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Big numbers catch your audience’s attention

 About The Terms Of The Agreement

Mars
Mars is actually a
very cold place

Mercury
It's the closest
planet to the Sun
toolkit

Follow the link in the graph to modify its

data and then paste the new one here.
For more info, click here
 $20,000
Mars is actually a cold place

$15,000
Venus has a beautiful name

$45,000
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Saturn has several rings

 Management Approach

Mercury is the Venus is the second

smallest planet planet from the Sun

January February March April

Mars is actually a The Earth is the

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very cold place planet we live on

 Strategic Alliances

It’s the closest planet

MERCURY
to the Sun
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Mars is actually a very

MARS
cold place
 Answers And Arguments

WRITE YOUR QUESTION

WRITE YOU ANSWER

MERCURY VENUS JUPITER

Mercury is the closest Venus is the second Jupiter is the biggest
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planet to the Sun planet from the Sun planet of them all
 Waterfall Management Plan

REQUIREMENTS Mercury is the closest planet to the Sun

DESIGN Venus is the second planet from the Sun

IMPLEMENTATION The Earth is the third planet from the Sun

VERIFICATION Mars is actually a very cold place

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MAINTENANCE Jupiter is the biggest planet of them all

 Maturity Model

Basic Standard Advanced

Mercury is the closest planet Venus is the second planet The Earth is the third planet
to the Sun from the Sun from the Sun

30 50 70
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% % %
 Profitability Ratios
WORST PEER BEST

RETURN ON SALES (%) % % %

RETURN ON EQUITY (%) %

RETURN ON NET ASSETS (%) % %

RETURN CAPITAL EMPLOYED (%) %

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RETURN ON FUNDS EMPLOYED

(%)
% %

VENUS MARS JUPITER

 Top 10 Questions Of Business Plans

Mercury is the closest planet to the Sun Jupiter as named after the Roman god of
1 and the smallest one 6 the lightning

Jupiter is a gas giant and the biggest Saturn was named after the Roman god
2 planet of them all 7 of the agriculture

Saturn is a gas giant and has several Mercury’s name has nothing to do with
3 rings around it 8 the liquid metal

Venus has nice name and it’s the second Venus is terribly hot and it’s atmosphere
4 planet from the Sun 9 is poisonous
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Despite being red, Mars is actually a Mars full of iron oxide dust, which gives
5 very cold place 10 its reddish cast
 Demo Software & App

You can replace the image on the

screen with your own work. Just
right-click on it and select “Replace
image”
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Sun Smith John Archer

You can speak a bit about You can speak a bit about
this person here this person here
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